The food chain of mobile: how VoIPs are devouring telcos

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If you think maintaining your long distance relationship is a private matter, you are most certainly wrong; telcos and governments are third wheeling.

Unlike you, they are happy your significant other is overseas because it means you’ll have to use their services to call, and the more lonesome you are, the better. However, what they are infuriated about is that you can call for free.

Voice over IP (VoIP) applications such as Viber and Skype might very soon be responsible for the extinction of traditional phone calls, especially international calls. In fact, as a result of such services, the global telecom industry is estimated to lose around $500 billion by 2020.

“Telcos reached a critical moment where their revenues and margins are not what they used to be, they’ve lost huge volumes to companies like us,” said Omar Onsi, CEO of Nymgo, a Beirut-based VoIP application.

Although a higher demand for VoIP means a higher demand on data bundles which telcos themselves provide, the revenue growth from data plans is not synchronized with its demand. Unlike phone calls, which have a unit price per minute, VoIP is not measurable because 1GB can be used for multiple applications.

VoIP is not only cost effective for individuals but for startups and companies as well. Ya Msafer, a Palestinian hotel and apartment booking site, introduced VoIP to its customer service operations to provide better customer care.

“VoIP is especially compelling in travel tech because our users are often roaming while on vacation. The technology allows us to completely eliminate call charges for our customers,” Faris Zaher, the founder of Ya Msafer said in an interview with Wamda.

The idea of imposing additional charges to VoIP as a solution to the telco threat has been rumbling in the halls of the Jordanian government since late 2015.

Two weeks ago the Ministry of Information and Communications Technology announced the possibility of adding a $3 monthly subscription to the use of VoIP, of which 75 percent would go to the government.

Public outrage followed the announcement and lead to the formation of a boycotting group “Sakker Khattak”, which called for closing all cellphones for a day.

Instead of imposing subscription fees, the final decision included three different tax hikes on the telecom sector, the most significant one relating to the fixed and mobile internet services which are now subject to 16 percent after a 100 percent increase.

A 2014 study shows that Jordan has the world’s second highest consumer tax in proportion to mobile ownership.

The government’s interest in telcos is well justified: 12 percent of the country’s GDP is channeled through the ICT sector, and six percent of its total tax revenue comes from mobile operators.

According to Marwan Juma, former ICT minister in Jordan, the government and telcos attempts to fix the ailing sector are mere tinkering rather than real change.

“What is needed in Jordan is a coherent reform in the telecom sector. The whole formula and revenue streams have changed. What worked seven years ago, does not work today,” he told Wamda.

Working legally means that companies need to get licensed in all the countries they operate in, which is impossible, explained Onsi. The internet has disrupted the traditional way of doing business and no one can stop it, he said.

Onsi’s company often gets blocked, especially in the UAE. Despite the country’s endorsement of technology and innovation, it is strictly and wholeheartedly hunting after VoIPs.

“They block us at least three times every week, but we bypass the block within minutes,” the founder said.

According to Juma, the heavy restrictions imposed by the UAE is caused by the lack of liberalization in the telecom sector. The government mostly owns the only two existing telcos.

Adding additional fees to VoIP apps or blocking them might be a temporary solution, but it is far from being a viable one.

“Blocking every single VoIP company is impossible; there’s a lot,” explained Onsi. “Therefore, assigning operators to track the bypasses is a nightmare, especially that many users use VPN,” he said.

By targeting VoIP, telcos and governments seem to be only fighting the symptoms of a bigger more serious problem, that of a drastic change in industry.

Although Onsi admits that it is a fierce battle , he is confident that it is a losing war for telcos. Whether in five years or in 20, VoIPs will be victorious, he said.

Tala is Wamda’s writer based in Amman where she covers the Jordanian startup ecosystem and keeps an eye on talented entrepreneurs to feature. She is also currently producing Blank Maps, a podcast about statelessness in the Arab world. You can reach her at tala[at]wamda[dot]com, or via LinkedIn.